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NEW DELHI: Infosys Ltd, which rallied over 2 per cent in trade on Thursday, a day before India’s second biggest IT firm will declare its results for the June quarter - cooled off towards the fag end of the session.

Infosys pared some of its morning gains and closed 1.03 per cent higher at Rs 2526. It has hit a low of Rs 2506.30 and a high of Rs 2563.45 in trade today.

Volatility in Infosys stock option is at five-year highs as over the past two years the share has moved wildly on either side on the results day. Due to the higher volatility option sellers are charging more premium and post the result, there would be a sharp fall in volatility.

"As the stock moves up or down sharply, so the traders are also buying options of different strike prices to protect their position and that is why we are observing huge activities in all strikes of call & puts," said Chandan Taparia, Derivatives Analyst at Anand Rathi.

"The stock has been facing sustained supply around Rs 2525-2530 zone from the last four weeks and if it sustains on the upside, then it has potential to head towards 2700 levels," he added.

Taparia is of the view that immediate support for the Infosys stock is placed at Rs 2400 level and below that it may drift down to 2250 levels. Infosys is expected to report 5.6 per cent sequential growth in the rupee-denominated revenue for the June 2013 quarter, much better than the 0.3% increase in the previous quarter, according to the average estimates of six brokerages and an ETIG forecast. Net profit, however, is expected to drop by 1.9 per cent.

The company is likely to report Rs 11,042.9 crore in revenue for the June 2013 quarter helped by a strong depreciation in the rupee against major currencies.

According to analysts, Infosys’ first earnings announcement after the return of N R Narayana Murthy is expected to put the co-founder under spotlight as analysts seek clarity on the future growth path of the company.

"This, in my opinion, would prove to be the decisive levels to watch out in trade on Friday," he added. If we are able to conquer the levels of 2560, stay above it and also maintain good volumes. We might see the levels of 2700 on this stock, added Hathiramani.

Over the past two years, Infosys’ share has swung wildly on either side, especially on the results day, making it hard for investors to take a constructive bet.

Shares of the company have been under pressure since April, after the IT major said it expects dollar revenue for FY14 to grow between 6 per cent and 10 per cent, much lower than analysts’ estimates.

"Any lower revision to already nadir growth projection could pose a significant negative bearing on its stock," said Nitin Prakash Daga, AVP - Research at Microsec Capital Ltd. Daga advises investors to stay cautious or take hedged bets on the stock as it may remain highly volatile on the result day.

Different types of clients can use respective option strategy to hedge or play the market movement:

Analysts: Chandan Taparia, Derivatives Analyst at Anand Rathi

Maximum Call OI is at 2700 strike (approx 6 lakh shares) which is trading at around 80 points. So according to that it would be tough to cross 2780 levels in the next coming sessions.

1. Those holding long position or having negative market view: Initiate 2500-2200 Bear Put Spread (Buy 2500 strike Put and sell 2200 strike Put). Position would be hedged till 2200 levels with the cost of around 85 points with profit potential of 215 points.

2. Those holding short position or having positive market view: Initiate 2500-2800 Bull Call Spread (Buy 2500 strike Call and sell 2800 strike Call). Position would be hedged till 2800 levels with the cost of around 100 points with profit potential of 200 points.

We are advising to go for Long iron condor or Butterfly strategy to get the benefit of higher option premium led by higher volatility. Initiate Infy Iron Condor Option Strategy by Selling 2500 Call & 2500 Put and to hedge the same buy 2150 put and 2850 Call. Traders would get profit if Infy remains in between 2280 and 2720 levels post the result. Maximum profit in this strategy would be 220 points with the maximum risk of 130 points.

Brokerage Firm: Sharekhan Ltd

Infosys has taken support around 2200 levels after it reported dismal fourth quarter results. The current implied volatility (IV) of the stock is in a band of 70-75%, which is comparatively higher to that of normal day’s average implied volatility as the company’s results are lined up on July 12, 2013 (Friday).

Investors can deploy Bullish condor which is a limited risk, limited profit option trading strategy that is constructed when one expects the volatility in the underlying security to decrease significantly.

The strategy has a spread outflow of 18.40 points in Infosys, which amounts to Rs2,300 (18.40*125), which is also maximum risk in the strategy.